Emerging Cuba worries Caribbean

In 38 years of holding annual conferences, Caribbean Central America Action, a Washington-based organization that brings together regional business and government leaders, has never held a meeting that has focused almost exclusively on a single topic and a single country.

But its recent 39th conference in Miami brought a laser focus on what Cuba’s new relationship with the United States and the rest of the world will mean for the wider Caribbean and for regional integration. “It has implications for the entire region,” said Sally Yearwood, CCAA’s executive director.

Speakers called Cuba, which has the largest population of any nation in the Caribbean and the second-largest in the Caribbean Basin, a disruptor, a game changer and the new attraction.

“Cuba is both an opportunity and a challenge,” said Richard Bernal, a longtime Caribbean diplomat who is now a senior consultant to the Inter-American Development Bank but wasn’t speaking on the IDB’s behalf. “The rest of the region will have to find a way to survive and thrive in that context.”

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Cuba is in the process of normalizing relations with the European Union, China is its second-largest source of foreign investment, and the island is already well-integrated with many countries in Latin America and the Caribbean.

As its relationship with the United States develops, Cuba potentially poses competition for the rest of the region in tourism, trade and investment.

But the conversation at the CCAA conference was not so much about how to compete head-to-head with Cuba as about how to make the pie bigger so other Caribbean nations can share in the benefits of Cuba’s emergence.

Tourism competition may be the most immediate threat. Cuba already receives more visitors than any other Caribbean country except the Dominican Republic, and it is poised to receive many more as a result of new more liberal travel rules for Americans and if the U.S. travel ban for Cuba is lifted completely.

Cuba is the fastest-growing destination in the Caribbean — during the normally slower summer months overnight visitors to Cuba were up nearly 22 percent — and the island has already surpassed its 2014 record of 3 million international visitors.

That means the Caribbean must explore multi-destination marketing, Bernal said. Many Caribbean islands have unique characteristics, he said, and it’s possible that eventually, Cuba’s niche might become medical tourism.

The Caribbean should respond to the challenge of Cuba by “upping” its game and becoming more competitive, said Frank Comito, chief executive of the Caribbean Hotel and Tourism Assn.

The Caribbean as a whole could focus on making entry and access to its destinations more affordable, search for a regional approach to high energy costs, and engage in joint marketing of a Caribbean brand, he said.

“We have a major disruption on the way,” Comito said. “If handled right by the region, it’s an opportunity to raise all ships.”

If Cuba were to join CARICOM, the Caribbean Community and Common Market, it would double the population of the potential market and could change how agreements between the United States and the Caribbean region are negotiated, said Bernal, who has served as lead negotiator for CARICOM in many trade and investment talks. Cuba currently isn’t part of any major free trade agreements.

“It is in CARICOM’s interest to engage with Cuba,” Bernal said.

So what should small island economies do in the face of Cuban competition?

First, said Bernal, they must act with speed: “Opportunity is the most perishable thing in the global economy.”

Among his other recommendations:

▪ Consider strategic alliances with Cuba. Small countries have more leverage when they act collectively, Bernal said.

▪ Rethink the notion of a regional economy. An enlarged regional economy, with the addition of Cuba, helps the Caribbean reach critical mass and become more attractive to foreign investors and traders, he said.

▪ Remember that the addition of Cuba can change the politics of the region. Cuba, with many of the same features and challenges of small island economies, can help amplify the Caribbean’s voice in global institutions, Bernal said.

▪ Think about the regional economy non-traditionally and include the diaspora. Linking with the diaspora will help create a more influential Caribbean trans-national economy. Many of the things that are in short supply in the Caribbean — capital and human resources, for example — reside in the diaspora, Bernal noted.

If Cuba wants faster economic growth, it will need to open its economy more, said Ricardo Torres, a research economist at the University of Havana’s Center for the Study of the Cuban Economy. “Cuba is starting from a very low base in terms of economic development.”

If the right conditions are created and Cuban growth accelerates, Torres said, it could create opportunities for other Caribbean nations to export to Cuba.

“We come from small islands, and we have problems of scale,” said Ana Carolina Franco Soto, director of economic, industrial and commercial analysis at the Dominican Ministry of Industry and Commerce. “We see the entry of Cuba as a great opportunity for the Dominican Republic and Dominican exports.

But Arturo Cruz, a Nicaraguan who is a professor at INCAE Business School, said the transition from statist economies to more market-oriented economies that many Latin American countries went through in the 1980s and 1990s “looks like a picnic in terms of the complexity of a Cuban transition.”

Not only must Cuba, which began limited market reforms in 2011, unify an awkward dual currency system but it faces many infrastructure and capacity challenges.

“Many are saying in Cuba that there is not nearly enough infrastructure to support a big influx” of U.S. visitors, Torres said.

It’s possible the Caribbean could provide entrepreneurial experience and Cuba could import management services and technology from other islands, Bernal said.

As the U.S.-Cuba relationship progresses, Bernal said, “some people think there will a huge sucking sound” as it attracts investment that might have found other regional destinations. Among Cuba’s advantages, he said, is its large, well-educated population with somewhat lower expectations than labor forces elsewhere in the Caribbean.

Because of Cuba’s difficulties tapping into conventional investment financing, “relations with China will be critical in the short-term,” Bernal said.

It is in CARICOM’s interest to engage with Cuba.

Richard Bernal, Caribbean diplomat.

Rep. Stacy Plaskett, the delegate from the U.S. Virgin Islands to the House of Representatives, said she first became concerned about Cuba and its potential impact in 2008 as Cuba built its relationship with the rest of the world. She said she began asking whether the Caribbean “would become totally subsumed by this large new giant.”

The time to come up with a game plan for Cuba that “will allow us to be at the table and support our own economic growth” is now, she said. CCAA members can’t allow themselves to be “fighting for scraps when the embargo is lifted.”

Given the U.S. electoral cycle, Plaskett said she doesn’t believe the embargo will be lifted in the next three years, but Caribbean countries — faced with a brain drain and lack of long-term sustainable growth in many cases — need to be ready.